GOV-Deriving gov wide F/S

Question 1

The three internal service funds of a town were presented in a single column in the basic financial statements. The town’s internal service funds supplied goods and services to the various governmental functions of the town. Combining the internal service funds in this way simplified:

Answer 1

Although classified as proprietary funds, the internal service funds of this town would be reported in the governmental activities column in the government-wide financial statements. Presenting them in a single column facilitates the preparation of the government-wide statements as the internal service fund operations of the town would be considered governmental activities and the enterprise operations would be considered business-like activities. Internal service funds are exempted from the major funds reporting requirements. All enterprise funds could be shown in a single column in the basic financial statements if none would need to be shown separately as a major fund. This aggregation does not change the notes disclosures required. Budgetary accounting, required for governmental funds, is not required for internal service funds.

Question 2

How is the reconciliation formula for funds statement to GOV wide?

Answer 2

The reconciliation of the $1,500 increase in governmental fund balances (modified accrual basis) to the government-wide change in net position (full accrual basis) involves adding back the expenditure recorded in the governmental funds when the capital assets were purchased ( + $9,000) and subtracting the depreciation expense required with full accrual ( - $3,000).

Question 3

In preparing Chase City’s reconciliation of the statement of revenues, expenditures, and changes in fund balances to the government-wide statement of activities, which of the following items should be subtracted from changes in fund balances?

A.
Capital assets purchases

B.
Payment of long-term debt principal

C.
Internal service fund increase in net position

D.
Book value of capital assets sold during the year

Answer 3

GASB requires a summary reconciliation between fund financial statements and government-wide financial statements. To adjust the total changes to governmental fund balances to the total change to the government-wide net position, additions and subtractions are needed. Capital asset purchases and payments of long-term debt principal would be considered expenditure reductions of governmental fund balances and would be added back, as asset acquisitions are not considered an expense reduction of net position. In preparing government-wide financial statements, internal service fund assets and liabilities would be added to those of governmental activities, requiring an addition, not subtraction, to net position. When capital assets were sold, the entire sales price would have been an increase to governmental fund balances, but only the gain on sale would be an addition to net position. Therefore, the book value of capital assets sold during the year is the only item requiring a subtraction to reconcile to the changes in net position.

THink of fund balance as Net Income. To get to accrual basis capital assets purchases normally are expensed so thus to have to addback to net income(fund balance). Same with payment of LT debt principal.

Question 4

A summary reconciliation between fund financial statements and government-wide financial statements is required at the bottom of the fund statements or in an accompanying schedule. For the governmental activities portion of the government-wide statement of net position, the reconciliation should tie with the fund balance(s) of:

Answer 4

The governmental activities portion of the government-wide statements reports the functions also reported in the general and other governmental funds. Internal service funds providing services for governmental functions are also included. Fiduciary fund information is not shown within the government-wide financial statements.

Question 5

Tuston Township issued the following bonds during the year ended June 30, 20X1:

Bonds issued for the garbage
collection enterprise fund that
will service the debt $700,000
Revenue bonds to be repaid from
admission fees collected by the
Township zoo enterprise fund 500,000
What amount of these bonds should be reported in Tuston’s government-wide statement of activities in the governmental activities column?

Answer 5

General long-term liabilities should be reported in the governmental activities column in the government-wide statement of net position, not the government-wide statement of activities. Further, bonds which will be serviced by an enterprise fund should be reported in the business-type activities column of the government-wide statement of net position. The bonds for the garbage collection enterprise fund and the revenue bonds for the zoo would also be reported in each enterprise fund.